FLY Leasing Reports Fourth Quarter and Full Year 2013 Financial Results

DUBLIN, March 6, 2014 /PRNewswire/ -- FLY Leasing Limited (NYSE: FLY) ("FLY"), a global lessor of modern, fuel-efficient commercial jet aircraft, today announced its financial results for the fourth quarter and full year of 2013.

Fourth Quarter 2013 Highlights

  • Net income of $13.4 million, $0.32 per share
  • Purchased six aircraft for $210.9 million, increasing portfolio to 113 aircraft
  • Executed inaugural $300 million Senior Notes offering
  • Upsized Term Loan by $105 million
  • Increased unrestricted cash to $404.5 million
  • Increased quarterly dividend by 14% to $0.25 per share

2013 Full Year Highlights

  • Net income of $52.5 million, $1.50 per share
  • Adjusted net income of $57.4 million, $1.68 per share
  • Added 14 aircraft to portfolio at a cost of $642.2 million
  • Sold ten older aircraft for net gain of $6.3 million
  • Raised $172.6 million of new equity capital
  • Raised $1.1 billion in debt financing
  • Paid four quarterly dividends totaling $0.88 per share

"2013 was a year of strong growth with the acquisition of 14 aircraft, primarily brand new models from Boeing," said Colm Barrington, CEO of FLY.  "We also disposed of ten aircraft with an average age of 13.6 years.  As a result of these transactions we have increased both the size and value of our fleet and have lowered its average age. Having raised more than $1.2 billion in new debt and equity funding last year, FLY is now well positioned to achieve its target of growing the fleet by 15% in 2014."

"Our net income increased 10% over last year, and we expect to see a positive impact on our EPS going forward from the aircraft we acquired late in 2013," added Barrington. "Resulting from the growth in our cash flow, we increased the quarterly dividend by 14% to $0.25 per share in Q4, which equates to an annual dividend of $1.00 per share.  FLY has started 2014 in a very strong position."

Financial Results

FLY is reporting net income of $13.4 million or $0.32 per diluted share for the fourth quarter of 2013.  This compares to net income of $31.0 million or $1.17 per diluted share for the same period of 2012.

The fourth quarter 2013 results include a transactional impairment charge of $8.8 million associated with an aircraft that will be sold in 2014.  The Company anticipates that this impairment charge will be largely offset by end of lease revenue associated with this aircraft in the second half of 2014.  Fourth quarter 2013 operating lease revenue includes no end of lease revenue, whereas there was $14.0 million of end of lease revenue in the fourth quarter of 2012.  In addition, the fourth quarter 2013 results include $18.6 million in net gains associated with refinancing transactions. 

The fourth quarter 2012 results include a one-time, pre-tax gain of $36.9 million associated with the sale of FLY's 15% ownership interest in BBAM, a transactional impairment charge of $11.4 million on aircraft which have been sold, and $7.6 million of expenses associated with refinancing transactions.

In addition to the fourth quarter items discussed above, the 2012 results include a one-time, pre-tax charge of $32.3 million related to the termination of interest rate swaps associated with a credit facility that was fully repaid during 2012.

Net income for the year ended December 31, 2013 was $52.5 million or $1.50 per share compared to $47.7 million or $1.80 per diluted share for 2012.  2013 operating lease revenue of $359.4 million includes $47.6 million of end of lease revenue as compared to 2012 operating lease revenue of $376.4 million which included $49.8 million of end of lease revenue.

Adjusted Net Income

Adjusted Net Income was $4.9 million or $0.12 per share for the fourth quarter of 2013 and excludes the gain recognized in connection with the restructuring of one of our debt facilities.  This compares to Adjusted Net Income of $53.2 million or $2.04 for the fourth quarter of the previous year.  2012 Adjusted Net Income included the $36.9 million pre-tax gain from the sale of FLY's 15% ownership interest in BBAM.

For the year ended December 31, 2013, Adjusted Net Income was $57.4 million or $1.68 per share compared to $116.3 million or $4.48 per share for the year ended December 31, 2012. 

A reconciliation of Adjusted Net Income to net income determined in accordance with GAAP is shown below.

Dividend

On January 9, 2014, FLY declared a dividend of $0.25 per share in respect of the fourth quarter of 2013. This represents a 14% increase from the previous quarterly dividend.  This dividend was paid on February 20, 2014 to shareholders of record on January 31, 2014. This dividend is FLY's 25th consecutive quarterly dividend totaling $6.37 per share.

Financial Position

At December 31, 2013, FLY's total assets were $3.7 billion, including flight equipment with a net book value of $3.0 billion. Total cash at December 31, 2013 was $579.3 million, of which $404.5 million was unrestricted. These amounts compare to total cash of $300.6 million and unrestricted cash of $163.1 million at December 31, 2012. 

In July 2013, FLY completed an underwritten public offering of 13,142,856 common shares in the form of ADSs at a price of $14.00 per share, generating net proceeds of approximately $172.6 million

During 2013, FLY's Term Loan was re-priced for a second time, reducing the interest rate margin over LIBOR to 3.5% and the LIBOR floor to 1.0%.  The original margin was 5.5% and the LIBOR floor was 1.25%.  The Term Loan was also upsized by $105 million, and the maturity date extended by one year to August 2019. 

In July 2013, total commitments under our aircraft acquisition facility were increased to $450 million and the availability term was extended to July 2015.  This facility was used to purchase approximately $274 million worth of aircraft during 2013.  Certain of the aircraft financed in this facility have been refinanced with long term, secured financing, and at December 31, 2013, there was approximately $325 million of availability under the facility. 

Also during 2013, a limited recourse debt facility with a September 30, 2013 outstanding principal balance of $209 million was amended and restructured. The lenders extinguished approximately $29 million of debt, and FLY made a principal repayment of approximately $20 million.  Two of the aircraft secured by this facility will be sold with the proceeds paid to the lenders in full satisfaction of amounts outstanding.  A pre-tax gain of approximately $22.2 million was recognized in connection with the extinguishment of debt in 2013.  FLY anticipates that it will recognize a further gain on debt extinguishment of more than $3 million when the remaining two aircraft are sold in 2014.

In December 2013, the Company entered the unsecured bond market for the first time with the sale of $300 million aggregate principal amount of 6.75% Senior Notes due 2020.  As of December 31, 2013, the Company owned two unencumbered aircraft with an aggregate book value of $75.4 million.

During 2013, more than $440 million of debt was repaid or refinanced.  At December 31, 2013 FLY's net leverage, defined as the ratio of net debt to total shareholders' equity, was 2.9x, compared to 3.6x at December 31, 2012. Net debt is defined as book value of outstanding debt, less unrestricted cash and cash equivalents. 

Aircraft Portfolio

At December 31, 2013, FLY's 113 aircraft, shown in the table below, were on lease to 62 lessees in 34 countries. The table does not include the four B767 aircraft owned by a joint venture in which FLY has a 57% interest.




Portfolio at

Dec. 31,
2013

Dec 31,
2012

Airbus A319

19

19

Airbus A320

27

27

Airbus A330

1

1

Airbus A340

3

3

Boeing 717

-

6

Boeing 737

48

40

Boeing 747

1

1

Boeing 757

11

11

Boeing 767

1

1

Boeing 777

1

-

Boeing 787

1

-

      Total

113

109




At December 31, 2013, the average age of FLY's fleet, weighted by the net book value of each aircraft, was 8.6 years compared to 9.4 years at December 31, 2012. The average remaining lease term was 4.3 years as of December 31, 2013, also weighted by net book value, an increase of approximately 13 months from the prior year. At December 31, 2013, the leases were generating annualized revenues of approximately $371 million. FLY's lease utilization factor was 98% in the fourth quarter of 2013 and 96% for the year ended December 31, 2013.

Conference Call and Webcast

FLY's senior management will host a conference call and webcast to discuss these results at 9:00 a.m. U.S. Eastern Time on Thursday, March 6, 2014.  Participants should call +1-404-920-8355 (International) or 877-309-0213 (North America) and enter confirmation code 48989180 or ask an operator for the FLY Leasing earnings call. An earnings call presentation will also be available on FLY's website at www.flyleasing.com.  A replay will be available shortly after the call. To access the replay, please dial +1-404-537-3406 (International) or 855-859-2056 (North America) and enter confirmation code 48989180. The telephone replay and earnings call presentation will be available for one week.  A live webcast of the conference call will be also available in the investor section of FLY's website at www.flyleasing.com. An archived webcast will be available for one year.

About FLY

FLY acquires and leases modern, high-demand and fuel-efficient commercial jet aircraft under multi-year operating lease contracts to a diverse group of airlines throughout the world. FLY is managed and serviced by BBAM LP, one of the world's leading aircraft lease managers with more than 20 years of experience. For more information about FLY, please visit our website at www.flyleasing.com.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains certain "forward - looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as "expects," "intends," "anticipates," "plans," "believes," "seeks," "estimates," "will," or words of similar meaning and include, but are not limited to, statements regarding the outlook for FLY's future business and financial performance. Forward-looking statements are based on management's current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory and other factors and risks. FLY expressly disclaims any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in its views or expectations, or otherwise.

Contact:

Matt Dallas
FLY Leasing Limited
+1 203-769-5916
ir@flyleasing.com



FLY Leasing Limited

Consolidated Statements of Income

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)



Three months
ended

Dec. 31, 2013
(Unaudited)

Three months
ended

Dec. 31, 2012
(Unaudited)

Year ended

 Dec. 31, 2013

(Audited)

Year ended

 Dec. 31, 2012

(Audited)

Revenues





   Operating lease revenue

$  84,826

$   90,637

$  359,409

$   376,437

   Equity earnings from unconsolidated subsidiaries

494

3,403

1,871

9,383

   Gain on sale of investment in unconsolidated subsidiary

-

36,882

-

36,882

   Gain (loss) on sale of aircraft

-

(129)

6,277

8,360

   Interest and other income

149

78

1,930

1,634

Total revenues

85,469

130,871

369,487

432,696

Expenses





   Depreciation

39,749

33,838

146,400

136,633

   Aircraft impairment

8,825

11,382

8,825

11,382

   Interest expense

30,198

32,796

120,399

142,491

   Net (gain) loss on extinguishment of debt

(18,585)

7,628

(15,881)

7,628

   Selling, general and administrative

10,055

9,979

37,418

40,192

   Ineffective, dedesignated and terminated derivatives

(243)

518

(1,263)

31,871

   Maintenance and other costs

2,967

4,830

15,454

10,968

Total expenses

72,966

100,971

311,352

381,165

Net income before provision for income taxes

12,503

29,900

58,135

51,531

   Provision (benefit) for income taxes

(909)

(1,092)

5,659

3,862

Net income

$    13,412

$   30,992

$  52,476

$   47,669

Weighted average number of shares





-  Basic

41,306,338

25,918,379

34,129,880

25,792,932

-  Diluted

41,431,486

26,086,467

34,243,456

25,961,605

Earnings per share





-  Basic

$   0.32

$   1.18

$   1.51

$   1.81

-  Diluted

$   0.32

$   1.17

$   1.50

$   1.80

Dividends declared and paid per share

$   0.22

$   0.22

$   0.88

$   0.84











FLY Leasing Limited

Consolidated Balance Sheets

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)



Dec. 31,

 2013

(Audited)

Dec. 31,
2012

(Audited)

Assets



   Cash and cash equivalents

$   404,472

$    163,124

   Restricted cash and cash equivalents

174,829

137,457

   Rent receivables

2,922

3,124

   Investment in unconsolidated subsidiaries

8,179

6,308

   Flight equipment held for operating leases, net

3,034,912

2,616,864

   Deferred tax asset, net

-

9,450

   Fair market value of derivative assets

7,395

319

   Other assets, net

39,650

32,026

Total assets

$ 3,672,359

$ 2,968,672

Liabilities



   Accounts payable and accrued liabilities

$      16,592

$       15,662

   Rentals received in advance

17,422

14,402

   Payable to related parties

3,756

2,789

   Security deposits

52,837

47,474

   Maintenance payment liability

233,811

225,733

   Unsecured borrowings, net

291,567

-

   Secured borrowings, net

2,254,705

2,052,412

   Fair market value of derivative liabilities

24,577

48,967

   Deferred tax liability, net

7,746

-

   Other liabilities

20,523

29,231

Total liabilities

2,923,536

2,436,670

Shareholders' equity



   Common shares, $0.001 par value, 499,999,900 shares authorized; 41,306,338 and 28,040,305 shares issued and outstanding at December 31, 2013 and 2012, respectively

41

28

   Manager shares, $0.001 par value; 100 shares authorized, issued and outstanding

   Additional paid in capital

658,492

482,733

   Retained earnings

104,143

83,138

   Accumulated other comprehensive loss, net

(13,853)

(33,897)

Total shareholders' equity

748,823

532,002

Total liabilities and shareholders' equity

$ 3,672,359

$ 2,968,672



FLY Leasing Limited

Reconciliation of Adjusted Net Income, a Non-GAAP Financial Measure, to Net Income

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)



Three months
ended

Dec. 31, 2013
(Unaudited)

Three months
ended

Dec. 31, 2012
(Unaudited)

Year ended

 Dec. 31, 2013

(Unaudited)

Year ended

 Dec. 31, 2012

(Unaudited)

Net Income

$   13,412

$   30,992

$   52,476

$   47,669

Add (less):





   Ineffective, dedesignated and terminated derivatives

(243)

518

(1,263)

31,871

   Net (gain) loss on extinguishment of debt

(18,585)

7,628

(15,881)

7,628

   Aircraft impairment

8,825

11,382

8,825

11,382

   Non-cash share based compensation

892

531

3,177

3,635

   Adjustments related to GAAM Portfolio acquisition:





        Amortization of fair value adjustments recorded in purchase accounting

1,647

5,453

12,602

23,611

   Income tax effects

(1,045)

(3,262)

(2,553)

(9,484)

Adjusted Net Income

$     4,903

$   53,242

$   57,383

$   116,312

Weighted average diluted shares outstanding

41,431,486

26,086,467

34,243,456

25,961,605

Adjusted Net Income per share

$       0.12

$       2.04

$       1.68

$        4.48



Adjusted Net Income Plus Depreciation and Amortization, a Non-GAAP Financial Measure, to Net Income

(DOLLARS IN THOUSANDS)



Three months
ended

Dec. 31, 2013
(Unaudited)

Three months
ended

Dec. 31, 2012
(Unaudited)

Year ended

 Dec. 31, 2013

(Unaudited)

Year ended

 Dec. 31, 2012

(Unaudited)

Adjusted Net Income

$     4,903

$   53,242

$   57,383

$   116,312

Add:





   Depreciation

39,749

33,838

146,400

136,633

   Other amortization

4,784

4,551

21,676

19,423

   Provision for deferred income taxes

194

(8,068)

8,748

1,303

Adjusted Net Income Plus Depreciation and Amortization

$    49,630

$   83,563

$  234,207

$   273,671







FLY defines Adjusted Net Income as net income plus or minus the after-tax impacts of ineffective, dedesignated or terminated cash flow hedges, swap termination costs, non-cash share-based compensation, gains and losses on extinguishment of debt, impairment charges, and adjustments related to the GAAM portfolio acquisition comprised of amortization of fair value adjustments recorded in purchase accounting. FLY believes that Adjusted Net Income provides useful information about operating performance and period over period comparisons.  It also provides additional information that is useful for evaluating the underlying operating performance of our business without regard to the impacts of fair-value adjustments of debt that the company has assumed, acquired leases and derivative instruments and other non-recurring items of income and expense affecting current period results.  Adjusted Net Income should be used as a supplement to and not as a substitute for financial measures determined in accordance with Generally Accepted Accounting Principles in the United States. 

Adjusted Net Income Plus Depreciation and Amortization is a cash flow measure that provides investors with an additional measure for evaluating FLY's ongoing cash earnings, from which capital investments are made, debt is serviced and dividends are paid.  However, adjusted net income plus depreciation and amortization excludes certain positive and negative cash items, including principal payments, and has certain important limitations as an indicator of FLY's ability to pay dividends and reinvest in its business.  Management uses Adjusted Net Income and Adjusted Net Income Plus Depreciation and Amortization as a measure for assessing FLY's performance.  These measures should be considered in addition to, not as a substitute for net income or other financial measures determined in accordance with GAAP.  Finally, FLY's definitions may be different than those used by other companies.

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SOURCE FLY Leasing Limited



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